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Andrew Selous: Hon. Members on both sides of the House have agreed that a certain level of means-testing is essential and that it will play a part in any future system. I have the pleasure of serving with the hon. Lady on the Work and Pensions Committee. Is she happy with projections that some 83 per cent. of pensioners will end up being means-tested if we continue with current plans? It is the extent of means-testing that worries many of us.
Miss Begg: It is interesting that the phrase "means-testing" seems to be thought of as such a derogatory term. I am interested in what pensioners are entitled to. If lots of pensioners are entitled to lots of money, I do not have a problem with it. I find it quite difficult to argue against a system under which pensioners get extra money for spending half an hour on one phone call every five years.
A lady whom I met this summer has been £78 a week better off since October 2003 as a result of the introduction of the pension credit. She did not receive that money before because although she received only £40-odd from the basic state pension, she had £17,000 of savings, so she was over the eligibility limit for the minimum income guarantee. Her savings were disregarded under the pension credit, so her income more than tripled. She told me that she would quite fancy a nice comfortable chair and I said that she could
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afford to buy one now because she is receiving extra money and because she feels that her savings are safe. That shows how the pension credit works in practice.
Andrew Selous: I am sure that the hon. Lady agrees that there are several ways in which we could get money to poorer pensioners. However, although I am not demeaning means-testing per se, will she comment on the unintended consequences for savings and incentives to save of applying it to such an extent? That is why many of us have deep worries about the future.
One thing worries me about the official Opposition's position against means-testing: they seem to think that it is all right for people who are very poor to be means-tested, but that it is somehow demeaning to people with any money. If it is demeaning to people with some money, it is also demeaning to the very poor. The pension credit allows the poorest people to feel part of a wider spectrum of people who qualify for it, which perhaps takes some of the stigma out of the system. Why should it be all right to means-test people who are poor, but not those who are slightly better off?
Perhaps the biggest element of means-testing carried out by the state is the calculation of our taxation. Income tax is a form of means-testing. I am fairly sure that the official Opposition's position is not that means-testing is okay when the Government are taking money from someone, but not okay when used as a mechanism to give money to someone, yet that appears to be what they are saying.
We are demonstrating today the extent to which the debate on pensions has moved on. We are discussing today's pensioners because they are doing much better than before. Elderly women say that they are much better off than they used to be, and they often say that they are better off than they were during their working lives. One lady told me that all that she could afford when she was working was a bit of sausage meat, but that thanks to the pension credit she can now afford a bit of frying steak.
Mr. Michael Jabez Foster: My hon. Friend rightly points out that pensioners are better off than they were under the previous Government, but if the Conservatives were to abolish the pension credit system, surely the worry is that people on that credit would experience a freeze for 20 years while the basic pension caught up, so real poverty would return in the meantime.
Miss Begg: That is an enormous concern because, again, the poorest pensioners will have their income frozen. Those are the very pensioners who, for the first time in their lives, feel that they have enough of a disposable income to live comfortably. Their generation is not frivolous. They do not spend their money on sirloin steak. My constituent was buying frying steak. However, her expectation is that she will have a comfortable retirement, which is how it should be.
If we are to reform the pensions system, which I hope will come out of the Turner report, and seriously tackle the problem of women and pensions and poorer
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pensioners, we have to ensure in the meantime that the pension credit keeps it value. However, I accept that we may move away from that some time in the future because most things are not set in aspic. The pension credit exists to deal with the problem that has resulted from 100 years of a pension system that was structured to deal with working men with a dependent wife. We have to start looking at how we might want to restructure pensions. That is a long-term business and we have to consider long-term aims. I am glad that the debate has moved on to tomorrow's pensioners because it is important. The debate is not just about today's pensioners.
People in this country always associate pensions with old age. I have just come back from Australia. I was confused for the first couple of days when they kept talking about unemployment pension and disabled pension, but any welfare benefit there is called a pension, so it does not have the same association with old age. Whenever we talk about a pensions debate, we think that we mean the pensioners of today. The Government have done extremely well in dealing with the anomalies in our pension system and with the pensioners of today, but the real challenge is how we make provision for the pensioners of tomorrow, which all Governments must do. We need to debate that and reach some consensus.
It is simplistic for any political party to say that by merely increasing the level of the basic state pension, we will solve many of the problems. Many of them exist because of the structure of the existing state pension. It does not take account of women who have not workedperhaps because they have cared for children or elderly relatives or have been dependent on their husband. The state pension system is based on the dependency of one person on another.
The system is unfair. A married man with a non-working wife pays the same national insurance contribution as an unmarried man or an unmarried woman with no dependent spouse. Yet the married man gets 160 per cent. back from the state, whereas a single person gets only 100 per cent. That was fine when most people were in marriages with a dependent spouse, but that is not how society is structured today. It is not how we live our lives. People have more than one relationship. Women are in and out of work and have their own pensions. Indeed, the married man whose wife has worked and has her own pension only gets 100 per cent. of the basic state pension, not 160 per cent. So the unfairness is not about married men, but dependency. We have to consider ways of breaking that dependency to ensure that people have a basic state pension in their old age to which they are entitled by dint of the fact that they have lived for 60 or 65 years. Perhaps this is the time to talk about whether we should raise the state retirement age.
The hon. Member for Havant said that there was consensus between the CBI, the TUC and other bodies about what should happen with pensions, but there is not. The CBI thinks that the retirement age should be raised to 70, but the TUC disagrees. The TUC thinks that the private and occupational pension sector should include an element of compulsion, but the CBI does not. There is therefore an absence of consensus on significant areas of policy. I agree with the Secretary of State that
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the retirement age should remain 65 for the foreseeable future, as it would be nice if most people worked until they 65. My mother retired at 60 and my father at 65, but they are in the minority. Most people retire much earlier, and I was frightened to learn that one of my friends has just retired at 50. Other friends are looking forward to retirement at 55. I hope that they will go on to do other things, but we need a pension system that allows people to retire from their main job and take another without a reduction in their pension. We must provide the flexibility and incentives to encourage people to work longer, as has been said. If everyone knows that they will receive at least the basic state pension they will have an incentive to save for their retirement.
With the best will in the world, the basic state pension is just thatbasic. Hopefully, it lifts people out of poverty, but pensioners on the lowest level of pension credit of £107 are still living in poverty. The younger generation, however, want much more than the basic state pension and want more than any Government can afford. They expect to retire on the same disposable income that they enjoy while working. Even the most generous pensions are only two thirds of people's final salary, but when someone retires they pay less tax and do not have to pay contributions towards national insurance or their pension. They have probably paid off their mortgage, so the money at their disposal is not very different from their net income after housing costs and other expenses when working. To achieve that income level in retirement people must make extra arrangements on top of the state provision. Younger people quite reasonably expect to receive the income that their parents and grandparents enjoy in retirement, but they will not do so unless they are kicked into the realisation that they must start making provision now.
This is a big problem and needs a great deal of discussion. I am relaxed that the next phase of the Turner commission will not produce a report for another year, as there may be an election in the middle of that period, when there will be a lot of party political point-scoring. Pensions should have been the subject of an investigation 20 years ago.
I will be very proud of my Government at the next election when they start to answer these difficult questions and to equalise the pensions of men and women. As the hon. Member for Bournemouth, West (Sir John Butterfill) said, we should not have special groups for whom we have to make special allowances. We must ensure that everyone has at least a basic level of dignity in retirement and a basic pension, as well as anything that we can do on top of that to fulfil their expectations of higher standards when they retire. It is a great challenge, but I am sure that this House and the country outside are up to it.
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